Can a company remove a director for mismanagement in the UK?
Yes. Under UK company law, you can remove a company director for mismanagement but doing so requires a strategic, well-documented approach to minimise risk and ensure compliance with the Companies Act 2006.
Director mismanagement may include:
- Breaching statutory directors’ duties.
- Failure to manage commercial and regulatory risks.
- Lack of strategic leadership or competence.
- Breach of fiduciary obligations.
- Poor financial oversight or misuse of company funds.
In my experience, once the relationship between a director and other board members deteriorates, trust is difficult to rebuild. Many companies wait too long to seek legal advice, increasing the chance of reputational and operational harm. If legal advice is sought early, non-litigious routes like negotiation or mediation may preserve company value and reduce tension.
When trust is lost entirely, the business may have no option but to proceed with formal removal, especially if shareholders are concerned about corporate governance, investor confidence, or regulatory scrutiny.
What are the legal grounds for removing a director in England and Wales?
Removal by ordinary resolution (section 168 Companies Act 2006)
Shareholders can remove a director by passing an ordinary resolution with a simple majority (51%). To begin the process, members must serve a Special Notice at least 28 days before the shareholder meeting.
The director:
- Must be given formal notice.
- Can submit written representations in support of their position.
- Has the right to speak at the meeting.
The company is also required to file Form TM01 with Companies House once the director is removed.
Court-ordered removal
If the company has evidence of unfair prejudice under section 994 Companies Act 2006, the shareholders may apply to court for relief. If successful, the court can order the removal of the director. However, the courts rarely grant this remedy unless the Claimant’s can show serious misconduct or abuse of power.
Voluntary resignation
Provided the company’s Articles of Association, Shareholders’ Agreement, and the Director’s Service Agreement allow it, a director may resign voluntarily. No notice period is typically required, although contractual obligations may still apply.
The process: how to remove a director for mismanagement
To remove a company director for mismanagement, follow these steps:
- Review company documents
Examine the Articles of Association, Shareholders’ Agreement, and Directors’ Service Agreement. These may specify grounds and procedures for removal. - Serve Special Notice (28 days)
Give the company at least 28 days’ notice before the shareholder meeting. The notice must detail the proposed removal and be formally delivered to the company. - Inform the director and consider their submissions
The director has a right to submit written arguments and attend the meeting. Their representations should be read out if they cannot be circulated. - Pass an ordinary resolution
If more than 50% of shareholders vote in favour of removal, the resolution passes. - File Form TM01 with Companies House which removes the director from the official register.
Risks of improperly removing a director
Removing a director for mismanagement is not without legal and reputational risk.
Employment law consequences
If the director is also an employee, dismissal may trigger an unfair dismissal claim. To avoid liability, the removal must fall within one of the five fair reasons for dismissal:
- Capability or qualifications.
- Conduct.
- Redundancy.
- Illegality (continued employment breaches the law).
- Some other substantial reason (SOSR).
A formal process with clear documentation is essential.
Reputational damage and investor concern
Poorly handled removals can raise alarm bells for:
- Customers
- Partners
- Staff
- Investors
To minimise fallout, document:
- Financial mismanagement or breaches of fiduciary duty.
- Internal complaints or whistleblowing.
- Shareholder concerns.
- Correspondence between the director and board.
Taking early legal advice and keeping a full paper trail will protect the company’s legal position and public image.
FAQs
Can a company director be removed without their consent in the UK?
Yes. Under section 168 of the Companies Act 2006, shareholders can remove a director via ordinary resolution, even if the director does not agree.
Is mismanagement a valid reason to remove a director in the UK?
Yes. Mismanagement may constitute a breach of statutory duties or fiduciary obligations. It may also amount to a fair reason for dismissal if the director is also an employee.
Can a director bring a claim after being removed?
Yes. If the director is an employee, they may bring a claim for unfair dismissal or breach of contract. Shareholder-directors may also claim unfair prejudice if removal was part of broader exclusion tactics.
What documents do I need to remove a director properly?
Key documents include:
- Articles of Association
- Shareholders’ Agreement
- Director’s Service Agreement
- Board minutes
- Form TM01 for Companies House
Is legal advice necessary to remove a director in the UK?
Strongly recommended. Removal has legal, commercial, and reputational consequences. A solicitor can guide you through the correct process and reduce risk.
Getting Legal Help
To find out more about how our Company Law Solicitors can help you with removing a director or any other company law matter, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.
Note: This article does not constitute legal advice. For further information, please contact our London office.
Share this Post